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A new beginning?

When the most high-profile corporate war in recent Indian business history shows signs of ending there ought to be a sense of relief all round. The five-year-old dispute between the Ambani brothers with its origins in “ownership issues” has hardly been like other disputes that have engulfed many traditional Indian business families. Part of the reason of course is that the two brothers, Mukesh and Anil, were in effect seeking to assume the mantle of their father, who had in a generation built from scratch India's most valuable business in terms of stock market valuation. The very size of the Reliance group and its diverse interests had made it difficult to split the group's business equitably, when a division became necessary. The agreement of 2006 was perhaps the most practical way to divide the Reliance empire but, by its very nature, it could not have been enduring. The elder brother took control of the flagship Reliance Industries Limited (RIL) with interests in petroleum, oil and gas exploration, and refining, while Anil's share included telecom, power, entertainment, and financial services. It was evident the division left Mukesh with the aces, even though it was argued that companies in the high-growth areas of telecom and financial services were under the fold of Anil. Four years on, Mukesh's RIL has a market cap of Rs.3,25,630 crore, several times higher than the combined valuation of the Anil Ambani group of companies.

A “non-compete” clause had been inserted into the 2006 agreement to ensure that one did not venture into the other's territory, but that only left both chafing at the bit. The agreement, always tenuous, received a body blow with the Supreme Court decisively overturning the gas-sharing clause and upholding the primacy of the state in the ownership and distribution of natural resources. It could well mean that RIL does not have the flexibility to allocate the gas it promised to Anil Ambani's Reliance Natural Resources Limited (RNRL). With legal options running out, the two parties have been forced to negotiate. Significantly, the non-compete clause has been discarded and the two groups say they will strive to work together in a spirit of collaboration. On the other hand, they have agreed that each can enter businesses previously reserved for the other, which to the cynics implies new arenas of potential conflict. The prospect of cooperation and collaboration between the two brothers has been welcomed by shareholders, who immediately expressed themselves by pushing up the share prices of Reliance group companies on a bleak day for the larger market. Yet given the past history, it is unwise to assume that the perceived benefits will automatically accrue.